Disentangling managerial incentives from a dynamic perspective: The role of stock grants

Amal Hili, Didier Laussel () and Ngo Long

Pacific Economic Review, 2017, vol. 22, issue 5, 743-771

Abstract: We analyse the optimal contract between a risk†averse manager and the initial shareholders in a two†period model where the manager's investment effort, carried out in period 1, and his or her current effort, carried out in period 2, both impact the second†period profit, so that it may be difficult to disentangle the incentives for these two types of effort. We show that stock grants play different roles according to whether the signal of investment effort is less noisy, or noisier, than that of current effort. We determine simultaneously the optimal stock grants and the optimal restrictions on sales of shares.

Date: 2017
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https://doi.org/10.1111/1468-0106.12243

Related works:
Working Paper: Disentangling managerial incentives from a dynamic perspective: The role of stock grants (2017)
Working Paper: Disentangling Managerial Incentives from a Dynamic Perspective: The Role of Stock Grants (2016)
Working Paper: Disentangling managerial incentives from a dynamic perspective: the role of stock grants (2016)
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